A New Stage Of Shutterfly’s Growth
Shutterfly CEO Chris North opened the second quarter investor call by saying that Q2 2018 marks the beginning of a new stage of Shutterfly’s growth.
North reported that Shutterfly’s adjusted EBITDA for the second quarter was $84 million driven by Lifetouch over performance. Lifetouch revenue was $262 million, gross margin was 65.2%, and segment margin was $75.5 million. All three financial results were above expectations driven by strong performance in both the schools and preschool business units where Lifetouch experienced strong account retention and solid growth in new accounts. The positive results were partially offset by church, “which continues to face headwinds from declining church membership.”
Lifetouch performed better than expected driven primarily by the schools business.
He stated, “After three full months of Lifetouch ownership, we’re pleased with the business results, the Lifetouch leadership team, and the close alignment of mission and culture between the two companies. While the full integration of Lifetouch will take several years, the early integration work is off to a strong start and confirms our excitement about the potential for the combined company.”
North and CFO Michael Pope indicated increasing confidence in their ability to realize significant cost and revenue synergies and believe Lifetouch will contribute to and benefit from the combined scale and capabilities of the overall company, particularly Shutterfly’s world-class manufacturing platform.
North said that the company is focused on realizing three principal value creation opportunities. “First, gaining access to many Lifetouch customers as Shutterfly customers; second, realizing more revenue from Lifetouch customers within Lifetouch by accelerating the development of Lifetouch’s online ordering platform and offering products from Shutterfly’s broader range; and third, realizing significant supply chain, manufacturing and fulfillment cost synergies.”
Shutterfly’s strategy is to leverage Lifetouch’s existing customer base of more than 10 million existing households and the 1 million new kindergarten households added each year. North is committed to introducing Lifetouch customers to a lightweight first phase of technology integration using the Shutterfly Photos platform this fall with more to come in 2019.
Lifetouch schools customers, who have purchased digital images from MyLifetouch.com will experience the following benefits:
We can assume that Shutterfly will be aggressively marketing and offering promotions to these customers.
North described the steps taken by Lifetouch to prepare for the Fall School Picture Day peak. Indicating that Lifetouch “is ready to go.” “The field operations team is ramping photographers, the product teams have created photography plans, adding visual variety and the production team has tested their equipment and platforms.”
In July Shutterfly launched its new product line Shutterfly Kids. The category offers a variety of products for children including School Gear, Kids Room, Travel, Toys and Games, and Tableware. Designed for children aged 4 to 14 this new category seems like a natural and beneficial product extension attractive to Lifetouch’s customers. This initiative supports Shutterfly’s strategy of further monetizing the customers gained through the Lifetouch acquisition.
New Stage in School Photography
Shutterfly CEO Chris North opened the second quarter investor call by saying that Q2 2018 marks the beginning of a new stage of Shutterfly’s growth implying with it the beginning of a new stage of Lifetouch’s growth as well.
The competitive landscape in the school picture business is changing with the newly revived Lifetouch. Shutterfly has begun to experience the benefit of the Lifetouch acquisition and has plans to extend that benefit well into the future.
The volume picture industry is beginning a new stage as well. As 2019 promises to bring about more change, I encourage you to examine your volume photography business and determine if the products and services you offer and the value proposition you provide place you in a favorable competitive position. Is there more or is there something different that you need to do to ensure your growth in the future?